Managing Student Loans 101: What New Grads Need to Know

Throughout your college career, you know that you have student loans that you’ll have to pay, but the reality of the situation typically doesn’t settle in until after graduation. Once you’ve walked the stage and earned your diploma, the next hurdle you’ll have to jump over is student loan repayment.

For most graduates, the thought of having to repay tens of thousands of dollars in loans can be a scary thought. The best thing you can do is be informed and to know what options you have available to you.

Loan Lifecycle

After you've graduated, your grace period begins on your student loans. Grace periods last 6 months and during this time, you aren't required to make any payments on your student loans. However, it's best to make payments as soon as possible so that you're able to minimize the amount of interest that's applied to the principal balance once the grace period ends.

While most loans offer a grace period, PLUS loans don't, which means that as soon as you graduate, the repayment period begins.

Once the grade period ends, you'll receive a Repayment Obligation form, which breaks down your monthly payment, principal balance, and projected interest. Typically you'll receive a monthly bill 20 days before the due date. Federal loans can be paid online, using a mobile app, or through direct debit. Private lenders often offer similar payment options as well.

During the repayment cycle it’s important to avoid late or missed payments, as this can have serious consequences.

Know Your Repayment Options

No matter if you have Great Lakes student loans or loans through student loan providers like EdFinancial, it’s important to know your repayment options. When you originally applied for student loans, you also selected a repayment option. But, once it comes time to really pay your student loans, you may find that you need to switch to a more suitable repayment plan.

If your payments are leaving you strapped for cash, consider switching to an income-based repayment program that sets monthly payments based on a certain percentage of your income. This not only gives you a lower monthly payment but it also makes it much easier to budget for student loan payments.

Making Repayment More Affordable

While switching to a new repayment program is always an option, there are also other things you can do to make repayment more affordable and more manageable. One option is to consolidate your loans. Loan consolidation is available for federal and private loans, but you cannot consolidate a federal loan with a private loan. Federal loans must be consolidated through the government while private loan consolidation must go through the private lender.

With loan consolidation you’ll have a single monthly payment versus having to pay several different loans at the same time. This is much more manageable as you have one payment and a set interest rate. By consolidating your loans, you could lower your payment and pay less money towards interest.

Another option to consider is loan refinancing. When you refinance your student loans, you take out another loan with a new lender and then use that loan to pay off all or part of your student loans. The benefits of refinancing student loans include:

• Lower interest rate
• Lower monthly payment
• Longer repayment term

No matter which option you choose, both consolidation and refinance are great ways to make paying off your loans much less of a hassle.

Loan Forgiveness

Most college graduates assume they’ll be stuck paying off their student loans forever. But, depending on your situation, you may qualify for the federal loan forgiveness program known as Federal Student Loan Forgiveness (FSLF). With this program, if you meet eligibility requirements, your remaining student loan balance can be forgiven.

To qualify, you must be employed by a local, state, the federal government. Non-profit companies are also eligible for FSLF. You must also make 120 on-time payments and your loans must be direct federal loans. Last, you have to be enrolled in an income-based repayment program.

While there are strict guidelines that must be met, qualifying for FSLF means you’re only responsible for paying your student loans for 10 years. After that, any remaining debt is forgiven.

Conclusion

There’s a lot to know about managing your student loans. Be sure to keep this information in mind so that you can pay off your student loan debt as quickly and easily as possible.

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